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Fundamentals

During Thursday's (May 18th) Asian session, spot gold narrowly oscillated downward, and it is currently trading near $1975. Besides, recent U.S. data is stronger than expected, and the Fed officials' speech is hawkish, cooling the market expectations on the Fed to cut interest rates this year, and pushing up the USDX, forming pressure on gold. Meanwhile, the U.S. debt ceiling agreement is expected to be reached, and the market risk aversion cools, eliminating the attractiveness of gold. Thus, short-term gold prices face further downside risk, and the significant support position of $1969 may be tested.

On Wednesday, U.S. President Joe Biden and Republican House Speaker McCarthy stressed their determination to reach an agreement as soon as possible. Their target was to raise the federal government's debt ceiling to avoid a debt default that would have a catastrophic impact on the economy and hinted that an agreement to raise the $31.4 trillion debt ceiling is expected to be finalized next week.

Today, try to focus on the change in the number of U.S. initial jobless claims and the performance of the total annualized U.S. home sales in April, as well as the speeches of Federal Reserve Board's Jefferson, Barr, Dallas, and Fed President Logan.

In general, the risk-aversion sentiment regarding the debt ceiling is fading. It may bring up some pressure on gold, but it is also the so-called reason for the market short, there is no bullish trend on gold prices during the debt ceiling conference. Therefore, there is not too much negative news, while the debt ceiling issue covers a lot of problems, including the banking crisis, the risk of recession, and other concerns. Moreover, the U.S. commercial real estate prices announced this week have fallen for the first time since 2011, which accumulates financial pressure on the banking sector. These risks are still supporting factors for the gold price in the later stages. At present, the biggest limit to gold prices is that the interest rate cut expectation is not strengthened, and gold has no yield. Now, gold prices are at a high level, and a pullback is expected if there is momentum. Additionally, gold remains an effective risk-hedging asset in the long run.

The trading range today will be $1969-$2000.

Technical Analysis

Daily chart: MACD forms a death cross and widens. KDJ forms a death cross and the 5-day SMA breaks below the 10-day and 20-day SMAs continuously. Furthermore, gold has plunged below the psychological level of $2000, where now becomes strong resistance. The initial support for gold will be near $1969, and bearish signals will be multiplied if the support is lost. Further support will be at $1950 (close to the low of April 3rd), with the low of March 22nd near $1934.  

However, there are several supporting positions in the range of 1960-1970, where support has been gained repeatedly in the past one and a half months. If gold stays above this range, it may rebound again. Besides, the initial resistance above will be near today's high at $1986, and the resistance of the 5-day SMA is near $1995, while $2000 could be the reference as well. If gold crosses above the resistance, this round of retracement will end.

Trading Recommendations

Trading direction: Long

Entry price: 1970

Target price: 2000

Stop loss: 1945

Support: 1969.000/1934.000

Resistance: 2000.000/2020.000